UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16100 / March 31, 1999
FINAL JUDGMENT ENTERED IN SECURITIES AND EXCHANGE COMMISSION v.
JEFFREY NORTON, DONALD REYNOLDS, EDWARD MENSTER AND JOHN
TARTAGLIA, 95 CIV. 4451 (SHS) (S.D.N.Y.)
On March 8, 1999, a final judgment of permanent injunction
was entered against John Tartaglia in SEC v. Norton et al, No. 95
Civ. 4451 (S.D.N.Y.). The judgment permanently enjoins Tartaglia
from future violations of Section 17(a) of the Securities Act of
1933, and Section 10(b) of the Exchange Act of 1934, and Rule
10b-5 thereunder. In connection with the settlement of this
matter, Tartaglia agreed to pay a $10,000 civil penalty.
Tartaglia neither admitted nor denied the allegations of the
Commission's complaint for purposes of the settlement.
On June 14, 1995, the Commission filed a complaint alleging,
in relevant part, that defendants Jeffrey Norton, Donald
Reynolds, and John Tartaglia induced Harold Thurman to deposit
one million dollars into an escrow account controlled by an
escrow holder at a New York City law firm to facilitate the
purchase of "prime bank notes." The complaint did not allege
that Tartaglia was a party to the escrow agreement. The
complaint further alleged that the prime bank note transaction
never occurred and that Norton instructed the escrow holder to
wire Thurman's funds out of the escrow account, which Norton then
misappropriated for his own personal use.
The Commission has previously obtained judgments against
Norton and Reynolds. A permanent injunction was entered against
Norton, who was ordered to disgorge approximately $824,000 in
ill-gotten gains that he had misappropriated from Thurman. A
civil penalty was not imposed based on Norton's financial
inability to pay. A default judgment was also previously entered
against Reynolds.
During the litigation, Tartaglia filed a motion to dismiss
the Commission's complaint which the court granted in part and
denied in part, on the grounds that one aspect of the alleged
fraudulent transaction was not "in connection with" the purchase
or sale of a security, although matters relating to the parties'
escrow agreement were. Tartaglia also filed a summary judgment
motion. The court denied this motion with respect to liability
finding that there were issues of material fact regarding
Tartaglia's involvement in the escrow transaction, but granted
the motion with respect to the disgorgement claim because
Tartaglia did not receive any of Thurman's funds.